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The Expiration Adjust Method

Once you specify an adjustment, Aspen Systems keeps track of time for you. If you adjust the time to expiration and a day elapses, Aspen Systems reduces the time to expiration by calculating the adjustment less one day. To begin, consider the XADJUST value and the XDAYS values in the following figure:

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The XADJUST value is 0.00, and the XDAYS values are 15.00 (meaning 15 days) for all options. Like changing the interest rate, you can adjust the time to expiration several different ways. Suppose, however, you want to create a window that will forecast price performance five days into the future. To adjust the time to expiration at the quote window level, follow these steps:

1. Display the Quote Menu.

2. Select Option Parameters.

The Quote Option Parameters menu is displayed.

3. Open the Adjust field:

images/bopt200090000.gif Click the left mouse key once on the adjust field.

images/bopt200090000.gif Use the arrow keys to move the highlight to the Adjust field and press b.

An Edit Box opens in the Adjust field.

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4. Enter the number of days by which you want to adjust the time to expiration.

The values in the quote window change to reflect your adjustment to the amount of time to expiration.

Suppose you adjusted the time to expiration by five days by entering the number 5 in the Adjust field. Were you to do this, the XADJUST and all XDAYS values change:

images/bopt200000018.gif

Notice the XADJUST field now shows 5.00, or 5, the number of days by which we adjusted the time to expiration. Likewise, where the XDAYS field used to display 15.00, it now displays 10.00, the difference between 15.00 and 10.00. Were you to save this window, it would retain these parameters and expiration adjustments. These adjusted parameters apply only to this window. If you create another window just like this one, it inherits a time to expiration based on the values in the Expire Adjust field in the Global Option Parameters menu. By default, the global Expire Adjust parameter specifies 0.0 days adjustment, and, arguably, it should stay this way.